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February 13, 2013

Concidence? Big ETF News Accompanies Big ETF Conference

Major launches include ETPs on the Singapore dollar, BDCs and infrastructure, along with Schwab’s commission-free ETF version of OneSource

When a major gathering like the annual InsideETFs shindig occurs, product manufacturers and distributors come out launching.

That was the case over the past week, as Jim Wiandt’s Index Universe sponsored its 8th annual InsideETFs conference in Hollywood, Fla. As AdvisorOne portfolio channel and Research magazine editor Gil Weinreich reported from the conference, there was no shortage of big investing names speaking and exhibitors displaying their insights and products.

The conference began just days after Schwab announced it was launching a commission-free ETF version of its OneSource mutual fund platform. Beginning with 105 ETFs from six major ETF sponsors spanning all 14 Morningstar asset-class categories, many observers called the launch a game-changer. While other companies have similar commission-free ETF platforms (notably TD Ameritrade) and while some observers called the launch evolutionary rather than revolutionary, Schwab’s market size alone increases the platform launch’s impact, along with the fact that there are no limits on the number of trades investors can make on the platform, nor any hold requirements to discourage active traders.

Among the new ETF launches, on Wednesday Guggenheim Investments launched the Currency Shares Singapore Dollar Trust (FXSG), which it called the first Singapore dollar ETP. The product provides “pure exposure” to Singapore, the company noted in a statement, “by holding actual foreign currency deposits, not derivative instruments.”

William Belden, MD and head of product development at Guggenheim Investments, said the FXSG addition to its CurrencyShares lineup is attractive because it offers both “short-term tactical and long-term strategic opportunities” from the strong Singapore economy and “positive movement in the Singapore dollar."

Another ETF launch this week came from Market Vectors, which launched BZD, which it called the first ETF “to provide pure-play exposure” to business development companies, or BDCs (see Joyce Hanson’s report on that ETF).

On Tuesday, one of the smaller ETF sponsors launched a “niche but not insignificant new fund,” in Gil Weinreich’s words: the Yorkville High Income Infrastructure MLP ETF (YMLI). Yorkville’s overall niche is in master limited partnership research and asset management, and its launch last April of the Yorkville High Income MLP ETF (YMLP) was one of the most successful product launches in terms of net asset inflows last year.

As for which other ETFs are attracting money these days, Tom Lydon of ETF Trends reported that WisdomTree’s Japan Hedged Equity Fund (DXJ) has already doubled its assets since the new year began, boasting more than $2.1 billion in net new assets. That investor interest was no doubt sparked by the new Japanese prime minister, Shinzo Abe, who has been quite public about his government’s desire to weaken the yen, a strategy that did not please the G7 secretariat. On Tuesday, the group of the seven largest industrialized nations released a statement that it was concerned about movements in the yen, and that Abe’s strategy would be a subject of discussion at this weekend’s meeting of the G20 finance ministers in Moscow.

Lydon also reported that palladium ETFs were seeing healthy inflows on news of higher auto sales in both China and the U.S.

Noted advisor Ric Edelman (left) kicked off the InsideETFs conference Sunday with a preconference workshop on his approach to practice management, and then reiterated his view that mutual funds have a dim future in a discussion with IndexUniverse’s Matt Hougan on Tuesday, As reported by IndexUniverse, Edelman suggested that ETFs would displace mutual funds within 15 years. The mutual fund “made sense when it came out in 1924,” Edelman said. “That was a pencil and paper business model, and it doesn’t make sense in a technologically driven world.”

The bright future of the ETF industry was confirmed on Wednesday by Todd Rosenbluth, ETF analyst for S&P Capital IQ, who said in a note that “we can say with confidence that we believe the industry is strong and poised for continued innovation.”